thomasinatafur.com

August 2, 2011

Unless you’ve been living under a rock, all we’ve heard about the last few days is about the great American debt crisis. Let’s not make the same mistake our government has: spending funds that do not exist! So below I’ve reposted my September 2010 blog “Debt Diet.” If you’re not in financial shape, let today’s news be a awake up call, and the blog below a means for getting fit! Enjoy!
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Debt Diet

That’s right America! Besides needing to go on a weight diet, our country desperately needs to go on a debt diet. Oprah covered this topic in 5 series, so in case you missed it, or can’t afford to buy the tapes, not to worry! I took copious notes and would love to share them with you. Below are some of the highlights Oprah and her experts discussed.
Facts regarding the financial shape of Americans:
Debt is at an all time high, and Americans are saving less than ever
70% of Americans are living pay check to pay check!
More people have filed for bankruptcy, cars are being repossessed and homes are being foreclosed on in the greatest numbers in our history
Besides the recent recession, there are many psychological reasons we are in debt
This problem is worse than obesity
4 Steps to getting out of debt:
Step 1. Calculate your debt: You can’t fix something you don’t completely understand. Lay out EVERYTHING you owe. What do you owe the bank for your house, car, etc...each credit card you owe a balance, even the debt you may owe family and friends.
Step 2. Track your spending, find extra money, and use that money to pay down your debt: For one week, write down EVERYTHING you purchase (no matter the method). Once you and each family member has done this, it’s time to start asking the questions: Why do you purchase what you buy? Really examine the psychological reasons behind your purchases. Did you feel neglected as a child because you had little to spend? Is there a similar product at a reduced cost or can you make this purchase fewer times a week? Do you really need a Venti coffee at Starbucks everyday or can you splurge just a few times a week, or perhaps only order a Tall coffee? Once you’ve determined how you can reduce your expenses, use that extra money to pay down your debt.
Step 3. Learn the credit card game: If you’re on the hamster wheel of credit card debit, it’s time to get off. The credit card companies have no interest in helping you stop this cycle, in fact this is how they profit. Follow theses steps and reduce your debt even before you pay everything off
Determine the annual interest rate and amount owed for every credit card you have (even those with a 0 balance) Pay them off in the order of smallest balances first. This is a powerful psychological win. As you pay the next smallest debt, take the amount you would have paid on the ones now paid off and apply that amount to the next bill. Call the credit card company and renegotiate your rate. Don’t take no for an answer. Continue to climb the ladder of supervisors, and if that doesn’t work, call the next day. Sometimes it will take as many as 5 calls to get this achieved. Also, don’t be fooled by their initial annual rate fees. Read the fine print and stay on top of this by reviewing your statement every month. Do not close any cards with a 0 balance. Not only does this effect your credit score (it reduces it!) it also gives you no leverage when renegotiating your rates with other cards, because you’ve reduced your available credit line. When possible pay more than the minimum each month Keep in mind that the interest rate for cash against your card may be higher than the rate for charges. And charging for items like gas or food, may indicate to the credit card company that you are needy of cash. This, along with the cash advances, may trigger a rate increase. Never be late with your bills. This allows the credit card company to raise your interest rates
Step 4. STOP SPENDING!! I know, easier said than done. This is where true discipline will come into play. But once you get a handle on your spending and some time has gone by, you will build up greater will power and you will not want to slide back into your old habits. If you do, don’t fret. We’re all guilty of giving in from time to time. Simply get back on track, see if you can correct any damage (do you really need those jeans? If not, return them!), and continue to move forward to a healthy financial future.
For additional advice, contact me at ttafur@thomasinatafur.com

March 30, 2011

Mission Creep

Lately all the political talking heads have mentioned this term when discussing the role our (U.S.) military will play in Libya’s crisis for power. The term was first expressed to describe the concerns the role the UN would play in its peace keeping mission in Somalia, 1993. Wikipedia defines it as “the expansion of a project or mission beyond its original goals, often after initial successes.” Hearing this term reused (almost abused) all day Sunday made me wonder, can it be used outside of the context of military action? Is this something we see carried out in business affairs? It does happen in business, especially the consulting business. You (the consultant) and your client (in this case the decision maker) agree upon terms for your services, sign a contract, and willingly move forward. Everything is progressing nicely, but occasionally either an employee of your client or the client will ask you to do something above and beyond the terms of your agreement. In the beginning, it seems harmless, but after a while, it’s no longer a one-off activity, and is becoming a regular part of the expected service. Surprise! A form of mission creep has happened to you. We all want to go above and beyond for our customers, but it’s very easy to get swept up in to doing things that either go beyond the scope of our core competencies, or beyond the terms agreed upon by both parties. It almost never hurts the client, and usually undervalues the consultant. My favorite consultant guru, Alan Weiss, Ph.D. makes some great suggestions in his book “Getting Started in Consulting”. He’s coined the phrase “scope creep”, which is very similar to mission creep, and tends to happen early on in the negotiation before a contract is signed. Below are some suggestions you can take to ensure this doesn’t happen to you (before or after a contract is signed) and you keep your client happy.

Ensure your agreement is clearly defined: “Your objectives constitute the framework within which the project proceeds.” (pg. 136) Does your agreement clearly explain what the objectives are for your client? Is a focus group a necessity to reach the desired outcome you’re proposing to your client? If the client brings this up as something they believe they need, and you haven’t included it as part of your services, you might want to question whether you’ve clearly uncovered all of your client’s needs and what they value.

If it is not: That’s OK. It’s better to find out now while you and your client are agreeing upon terms, conditions and desired outcomes then to have a signed agreement only to learn three months into the project the client really wants or needs additional services. If this happens either you take a loss by adding a service you didn’t initially charge or your client starts to believe you’re trying to “nickel and dime” them. Consultants and clients always fair best when charges are value-based fees and not per hour/diem. So, reevaluate the terms with your client and make sure they understand how each service contributes to the objectives or does not contribute, and therefore may not be needed.

Inform your client: No matter how well you’ve done your due diligence, at some point in your consulting career additional requests of some kind will be asked well after the contract has been signed. Many times the true client (decision maker) is unaware of any additional or special requests being made. If the request is simple and doesn’t require too much work on your end or for you to incur additional costs, then make the customer happy and oblige. But do make a point of remembering these small favors and tasks and let your client know about how well you served them when your contract is up for renewal. If what is being requested is well beyond the scope, thus creating “mission or scope creep”, you need to inform your client immediately. They might be OK with the additional charges, or perhaps they need to better inform their employee about your role within the project. It’s critical that the relationship between consultant and client be collaborative if any project is going to be successful and have the best ROI possible.

February 14, 2011

It's Tax Time!

Last year I interviewed tax queen Roni Deutch. The best take away was her answer to what are the greatest challenges people face when doing their taxes. In a simple statement she said: getting organized! Apparently, disorganization of your receipts, and calculations, can create a greater risk of being audited. Below are 10 tips The Wall Street Journal outlines to help you avoid a tax audit. I also recommend if you have additional questions or concerns about your taxes, to reach out to Ms. Deutch at www.ronideutch.com. Now’s the time to do it....don’t wait until April!

Choose your tax return preparer with care: It may be tempting to use software programs like Turbo Tax, but if your taxes are complex (selling stock, rental property, etc...) I recommend you pay a professional who is current with tax code changes. The IRS recommends you go to opr@irs.gov (the IRS’s office of Professional Responsibility) to learn more about your preparer’s background.

Report ALL of your income: For those of you doing freelance work, independent contract work, etc... it might be tempting to leave out cash payments. The IRS is well aware you are paid by cash at times, and will therefore scrutinize your returns more closely. Don’t risk it. If you haven’t already created a spreadsheet do so immediately to record your cash income. Quicken software can help you organize this for future use.

Provide COMPLETE information: Try not to leave any areas blank. If it isn’t applicable, then write NA. Insufficient information will increase your risk for an audit.

Avoid claiming deductions that are audit red flags: Unfortunately the IRS has not (and probably never will) disclose what they consider to be automatic red flags. “If you meet the qualifications for claiming a home-office deduction, there's no good reason not to take the write-off. Check your eligibility in IRS Publication 587, Business Use of Your Home.” (WSJ)

Don’t file certain forms or schedules: “Some optional forms and schedules virtually guarantee an audit. For example, if you turn a hobby into a sideline and show a business loan, the IRS may question whether some of your deductions are legitimate. If that happens, you might file a Form 5213, which keeps the IRS from auditing you for the first five years of the business. If you can show that you're profitable in at least three of the years, then the business isn't a hobby and the losses in the other years aren't questioned. The problem: Filing the form virtually guarantees an examination at the end of five years. Better way: If you have loss years, be prepared to prove that you are operating the activity with a profit motive.” (WSJ)

Pay attention to details: According to the IRS, “less than 1% of returns that are filed electronically, compared with about 20% on returns submitted via paper” are audited. Again, I emphasize listening to my radio interview with Roni Deutch for her suggestions on tackling details. (Most tax professionals submit your tax returns electronically.)

Mind your personal entries: “The IRS selects returns for audit in some cases based on a Discriminant Function System or DIF score, which is based on IRS experience with taxpayers claiming certain deductions or credits within set income levels. For example, if you claim charitable contributions that are higher than the average deductions for your income level, this could lead to a personal audit; the personal audit may be expanded to include your business activities.” (WSJ)

Change your business status: IRS Statistics show that you are 10 times as likely to be audited as a Schedule C filer than if you incorporate your business and elect S corporation status. Besides tax reasons, you should officially register your company for other business benefits and protections.

Watch your state tax return: If you have tax issues with your state, it’s important to know it will be shared with the IRS. So don’t assume they do not work together.

Plan for an audit, just in case: Even if you’ve done everything correctly, it may not prevent an audit. Besides selective audits, many of them are random. To determine which documents should be maintained and for how long, please see my blog To Keep or to Shred? That is the Question for details.

January 17, 2011

Paradigm Shift

December 13, 2010

Giving

November 22, 2010

"Nice" your Way to the Top

October 25, 2010

Executive Presence

September 20, 2010

What Kind of Boss are You?

September 13, 2010

Debt Diet